With the interest rates on offer with term deposits barely keeping up with inflation, I think income investors ought to look to the share market for a passive income.
After all, the Australian share market has an average dividend yield of ~4%. This is vastly superior to anything you'll get from a term deposit right now.
But which shares should you buy? Here are three options to consider:
Macquarie Group Ltd (ASX: MQG)
If you're not keen on the big four banks then I think Macquarie could be a great alternative. I think it is one of the highest quality companies in the country and a great long term option. This is due to the quality and diversity of its operations and its talented management team. I believe these leave it well-positioned for strong earnings and dividend growth over the next decade. At present Macquarie's shares offer a partially franked trailing dividend yield of approximately 4.5%.
Telstra Corporation Ltd (ASX: TLS)
I think Telstra would be a good option for income investors. Although times have been hard for the telco giant, I believe things are improving now. Especially given easing competitive pressures and the arrival of 5G. Given its leadership position and superior network, I believe Telstra is well-placed to benefit greatly from 5G technology. In addition, another very big positive is that the end of the NBN rollout is now in sight. Combined with its cost cutting, this could mean that a return to earnings growth isn't that far away for the telco company. Presently, its shares offer a trailing fully franked 4.5% dividend.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final dividend option to consider ahead of a term deposit is the Vanguard Australian Shares High Yield ETF. This ETF is focused on Australian shares that offer above-average dividend yields. These are a diverse group of 60 shares which include mining giant BHP Group Ltd (ASX: BHP) and telco company Telstra. At present the ETF offers income investors an estimated forward 5.4% dividend yield.
